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Tempur-Pedic To Acquire Sealy

LEXINGTON, Ky. and TRINITY, N.C. — September 27, 2012 — Tempur-Pedic International Inc. ("Tempur-Pedic" or the "Company") (NYSE: TPX), the leading manufacturer, marketer and distributor of premium mattresses and pillows worldwide, and Sealy Corporation (NYSE: ZZ), a leading global bedding manufacturer, today announced that they have signed a definitive agreement to create a $2.7 billion global bedding provider.

The combination brings together two highly complementary companies with iconic brands and significant opportunities for global innovation and growth.  Founded in 1992, Tempur-Pedic is the leading manufacturer, marketer and distributor of premium mattresses and pillows made from its proprietary TEMPUR® pressure-relieving material in over 80 countries under the Tempur® and Tempur-Pedic® brand names. Sealy, with roots dating back to 1881 is a leader in the manufacturing and marketing of a broad range of high quality mattresses and foundations with a portfolio of well-known bedding brands, including Sealy®, Sealy Posturepedic®, and Stearns & Foster®.

The transaction has been approved by the Boards of Directors of both companies. Stockholders holding approximately 51% of Sealy's outstanding common stock have executed a written consent approving the transaction.  No additional shareholder approvals are required to complete the transaction.  Tempur-Pedic will acquire all of the outstanding common stock of Sealy for $2.20 per share, representing a premium of approximately 23 percent to Sealy's 30-day average closing price on Wednesday, September 26, 2012.  In addition, Tempur-Pedic will assume or repay all of Sealy's outstanding convertible and non-convertible debt, for a total transaction value of approximately $1.3 billion.  The transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to close during the first half of 2013.

Tempur-Pedic Chief Executive Officer Mark Sarvary commented, "This is a transformational deal that brings together two great companies, each with globally recognized brands. Tempur-Pedic and Sealy together will have products for almost every consumer preference and price point, distribution through all key channels, in-house expertise on most key bedding technologies, and a world-class research and development team.  In addition, our global footprint will span over 80 countries. The shared know-how and improved efficiencies of the combined company will result in tremendous value for our consumers, retailers and shareholders."

Tempur-Pedic and Sealy will operate independently. Larry Rogers, Chief Executive Officer of Sealy, who has been with Sealy for 33 years, will remain CEO of Sealy and report to Mr. Sarvary.

Sealy Chief Executive Officer Larry Rogers, said, "The complementary product and market fit of these two companies deliver a unique opportunity to create the first full spectrum, global bedding company that addresses all market segments and consumer preferences. Together, we believe that we can deliver more value than either business could on its own by leveraging our strong combined assets."

Strategic Rationale
Tempur-Pedic and Sealy have highly complementary products, brands, technologies, and geographic footprints. Their combination will provide significant opportunity for both entities to leverage each other's capabilities to grow beyond their current footprints, and to increase efficiencies across the entire supply chain.

    * Comprehensive Portfolio of Iconic Brands.  Together, Tempur-Pedic and Sealy will have the strongest brand portfolio in the industry with the most highly recognized brands including Tempur®, Tempur-Pedic®, Sealy®, Sealy Posturepedic®, and Stearns & Foster®. The combined company's brand portfolio will have some of the best known brands in North America, South America, Europe, Asia and Australia.
      
    * Complementary Product Offering.  The combination creates the most comprehensive suite of bedding products available in the market.  Sealy's strength and expertise in innerspring and hybrid innerspring mattress technologies fit seamlessly with Tempur-Pedic's position in visco-elastic mattress, adjustable base and pillow technologies. Further, the company will be able to invest more in R&D to strengthen existing products as well as develop innovative new offerings to better meet the needs and preferences of consumers and retailers.
      
    * A Truly Global Company.  Tempur-Pedic and Sealy have a highly complementary global footprint with distribution in over 80 countries. The combination provides both companies access to countries that represent future growth opportunities. Tempur-Pedic has a strong presence around the world, and particularly in North America, Europe, and Asia while Sealy is represented in a meaningful way in North America, Argentina and Asia. The Sealy brand is also well-recognized in many other key global markets through its international licensees and joint ventures.
      
    * Significant Shareholder Value Creation.  The combination is expected to be accretive in the first full year of operations, with annual cost synergies from the combined operations expected to be in excess of $40 million by the third year. These will be primarily realized through purchasing, supply chain and increased efficiencies.  In addition, the combination has the potential for revenue synergies as a result of a broader product offering and access to more channels, including international expansion.

    * Strong Financial Characteristics.  Together, Tempur-Pedic and Sealy had combined pro forma adjusted EBITDA of $504 million based on the 12-months ended June 30, 2012 for Tempur-Pedic and May 27, 2012 for Sealy.  The combined company will have strong cash flow characteristics that will enable rapid debt reduction and continued investment in growth initiatives.

    * Combination of Two Strong Management Teams.  The combination pairs two strong management teams with extensive industry and global consumer products experience.  Tempur-Pedic and Sealy have a shared corporate culture focused on consumer-driven product innovation to deliver the best quality of sleep and building strong retailer relationships.

Tempur-Pedic intends to finance the acquisition through debt financings, for which BofA Merrill Lynch has already provided customary commitment letters.

BofA Merrill Lynch is acting as Tempur-Pedic's exclusive financial advisor and Citigroup as lead financial advisor to Sealy. Perella Weinberg Partners acted as the financial advisor and Blank Rome LLP as the legal advisor to an independent committee of Sealy's Board. Bingham McCutchen LLP is acting as legal advisor to Tempur-Pedic and Simpson Thacher & Bartlett LLP as legal advisor to Sealy.

Conference Call Information
There will be a live conference call to discuss the proposed transaction today, September 27, 2012 at 8:00 a.m. Eastern Time. The dial-in number for the conference call is (877)303-6913 [Call: (877)303-6913] .  The dial-in number for international callers is (224)357-2188 [Call: (224)357-2188] . The call is also being webcast and can be accessed on the investor relations section of both companies' websites, http://www.tempurpedic.com or www.sealy.com. After the conference call, a webcast replay will remain available on the respective investor relations sections of both companies' website for 30 days.

Posted on October 2, 2012

Source: Tempur-Pedic

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